Puerto Rico is set to become the world’s worst economy next year (emphasis added)
the island’s economy will shrink by about 8% in 2018, according to a November forecast by the Economist Intelligence Unit.
Our @TheEIU forecasts for the world’s 20 slowest growing economies in 2018. #Venezuela to shrink yet again. #Saudi and some other oil producers sluggish. #Italy #UK among EU’s slowest. pic.twitter.com/rVX4Y4Onzm
— Robert Ward (@RobertAlanWard) November 21, 2017
Puerto Rico’s economic mismanagement has been a roadmap for disaster for decades: A welfare state with huge numbers of government sinecures, while neglecting infrastructure.
What could go wrong, has. Two months later: Puerto Rico doesn’t have power, education or economy running again.
But Puerto Rico Doesn’t Want Reform. The governor refuses to implement furloughs and pension cuts mandated by the Promesa (Puerto Rico Oversight Management and Economic Stability Act) board while asking for $94 billion in aid from Washington for reconstruction costs.
Rather than settle with bondholders and pay (some) of the debt earlier this year,
More unthinkable was ruining the “flat broke” image the commonwealth has been cultivating so it can write down debt and skip the matching requirements necessary to receive Federal Emergency Management Agency funds. It’s also more convenient to tap taxpayers than to borrow money from private entities asking for accountability. This is particularly true for a state-owned monopoly like Prepa, which is as much a political instrument as it is an electricity company.
When critics complained last year that Promesa would alleviate the pressure on island politicians to reform the welfare state, their concerns were pooh-poohed. Congress said Promesa’s “financial management and oversight board” would impose the discipline necessary for reform. Negotiated settlements with bondholders were to be given priority and existing restructuring agreements—like the one between Prepa and its creditors—were to be preserved.
None of this happened.
In a “forget it Jake, it’s Chinatown” move last week, governor Ricardo Roselló announced last week that the bankrupt commonwealth would pay Christmas bonuses to its employees.
Cross-posted at Fausta’s Blog.
Photo by vxla